Why Catapult Group International Ltd is one stock to watch

You may have noticed AFL, rugby union and rugby league players wearing what look like bras, with a special pocket in the middle of their back.

No, it’s not a new fashion statement, but a recent trend in sports analytics, with players wearing hardware devices to monitor and track their performance on the field.

Catapult Group International Ltd (ASX: CAT) is the company providing those devices as well as the sophisticated analytical software, which can be used to analyse the data gathered by the device.

A recent listing on the ASX, Catapult has a huge range of clients, including all AFL teams, all NRL teams every Super Rugby team, Australia’s cricketers, Wallabies and Socceroos, not to mention the Australian Institute of Sport – and that’s just in Australia.

Overseas, Catapult products are used by 12 US National Football League (NFL) teams, 10 US National Basketball Association (NBA) teams, 10 British soccer teams and more than 30 other premier teams competing in European competitions. In fact, 70% of revenues come from offshore. The funds raised in the IPO will be used to continue the company’s expansion into North America and Europe in particular.

Two of the company’s founders still work full time in the business, and hold a significant amount of shares after the IPO. Growth is expected to come from increased market penetration, continued subscription sales, recurring revenue, product upgrades and new analytical packages, and expansion into new markets such as military/defence and consumer devices.

Could this company, with its technology purchased from the Commonwealth Co-operative Research Centre (CRC) and its numerous patents be another CSL Limited (ASX: CSL)? By the way, did you know that CSL started out as Commonwealth Serum Laboratories, before being privatised in 1994 – hence the CSL.

Potentially it could be yes. But at this stage it’s still a risky proposition and the company has yet to produce a profit. It’s unlikely to pay a dividend either in its early days – with the company noting in its prospectus that it believes cash would be better served by being reinvested back into the company. If the company can generate high returns on equity – then logically, it should reinvest the cash back into the business.

Add this one to your watchlist.

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Motley Fool writer/analyst Mike King owns shares in CSL Limited. You can follow Mike on Twitter @TMFKinga

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